Sale was planned as part of privatization efforts under Greek bailout agreement

ATHENS—Greece said Wednesday it had failed to reach an agreement with Azerbaijan’s state energy company, Socar, to sell a 66% stake in Greek natural-gas operator Desfa, creating another obstacle in the country’s efforts to reach the privatization targets dictated by its bailout agreement.

The Azeri company proposed reducing the price of its investment, whose initial amount was €400 million. The proposal “was legally unfeasible and...